Correlation Between Bank of Hawaii and United Overseas

Can any of the company-specific risk be diversified away by investing in both Bank of Hawaii and United Overseas at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bank of Hawaii and United Overseas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank of Hawaii and United Overseas Bank, you can compare the effects of market volatilities on Bank of Hawaii and United Overseas and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bank of Hawaii with a short position of United Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Hawaii and United Overseas.

Diversification Opportunities for Bank of Hawaii and United Overseas

0.05

Correlation Coefficient

Bank of Hawaii  United Overseas

Significant diversification

The 3 months correlation between Bank and United is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Hawaii and United Overseas Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Overseas Bank and Bank of Hawaii is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bank of Hawaii are associated (or correlated) with United Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Overseas Bank has no effect on the direction of Bank of Hawaii i.e., Bank of Hawaii and United Overseas go up and down completely randomly.

Pair Corralation between Bank of Hawaii and United Overseas

Considering the 90-day investment horizon Bank of Hawaii is expected to under-perform the United Overseas. In addition to that, Bank of Hawaii is 1.58 times more volatile than United Overseas Bank. It trades about -0.01 of its total potential returns per unit of risk. United Overseas Bank is currently generating about 0.13 per unit of volatility. If you would invest  5,334  in United Overseas Bank on December 28, 2024 and sell it today you would earn a total of  394.00  from holding United Overseas Bank or generate 7.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bank of Hawaii  vs.  United Overseas Bank

Bank of Hawaii

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of Hawaii has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Bank of Hawaii is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

United Overseas Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Overseas Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, United Overseas may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bank of Hawaii and United Overseas

The main advantage of trading using opposite Bank of Hawaii and United Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Hawaii position performs unexpectedly, United Overseas can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in United Overseas will offset losses from the drop in United Overseas' long position.

The idea behind Bank of Hawaii and United Overseas Bank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Technical Analysis module to check basic technical indicators and analysis based on most latest market data.